Eric Seils

Financial Policy in the Netherlands 1977 - 2002
The Effects of Fiscal Contracts

Abstract

The paper analyses the course of Dutch financial policy
since the demise of Keynesian full employment. How did the public
expenditure ratio, the tax burden, and the deficit develop in the last
twenty-five years? Why did the government lose control over public spending
in the period between 1977 and 1982, even though it proved possible to
reduce spending continuously thereafter? Important explanatory variables in
this context are economic growth and the ideological orientation of the
government. In the 1990s, however, a literature on the common pool resource
problem of public budgets developed which emphasizes the impact of the
number of actors involved in financial policy-making as well as the
institutional design of the budget process for public spending. Combining
process tracing and intertemporal comparison, the study demonstrates how
fiscal contracts were made and how they were stabilized through the working
of the party system. It concludes that if other relevant variables are
allowed for, fiscal contracts did have a moderating impact on public
spending.